Our clients often ask us this question and our response is typically, “Why do you want to make the transfer?” The answers vary. Some clients want to transfer their home to their child and/or children because they believe it will streamline estate settlement, others because they want to protect the asset from Medicaid claims if they need nursing care or assisted living.
In the vast majority of cases, we do NOT recommend the transfer your home, or other property, to children outright. Here are some of the reasons:
- The transfer can cause the loss of capital gains tax benefits.
- Medicaid/Creditors may still penalize you for the transfer.
- You have given up legal control over your property and the right live in the house.
- If your child pre-deceases you, you or your other children must deal with your predeceased child’s spouse and/or children (who if they are minors are unable to act without court approval).
- When multiple children co-own property there may be conflicts about management, care, etc.
Some concerns can be addressed in the deed – sometimes. However, this can also often cause other problems. We therefore generally – based on the particular circumstances – recommend other mechanisms to satisfy your goals:
- Let the property pass under your Last Will &Testament. Avoiding probate is not a good reason to transfer your property now. Here is why:
- Even if you transferred the home now, probate may be needed for other assets that you cannot or do not transfer.
- Probate will not cause a delay of the sale of the property. In the vast majority of cases probate will be completed (10 days in NJ, 30 to 60 days in NY) before the property is sold.
- Probate is not expensive – it is far less expensive than the negative consequences of making an outright transfer now, usually about the same as the cost of setting up a trust.
- Use a Trust. A well thought out trust can address concerns from property management, to Medicaid planning, protecting your home and other assets, providing for your care, and making gifts to your beneficiaries upon death. Trusts also:
- Control who receives gifts, what they receive, and when they receive it – in great detail.
- Can provide for alternate gifts and for many family and financial contingencies.
- Can be used to protect assets for and from beneficiaries.
- Can be used to save taxes.
- Can appoint someone as “Trustee” to carryout the Trust directives.
Which is the better choice for you? That depends upon the specific facts, circumstances, and goals of your case. Once the plan is decided upon, it must then be properly implemented and monitored as you move forward (too often we have reviewed planning done by others that was not properly implemented or followed through). If you need help, we are here to assist you in making and carrying out your plan.